Understanding Mortgage Payment Frequency

When you get a mortgage, you’ll need to decide how often you want to make your payments. This is called your payment frequency.

But not all payment options are created equal. Some can save you money on interest and help you pay off your mortgage faster, while others may be more convenient based on your budget.

So understanding the benefits of each payment frequency can help you make the best choice for your financial goals.

What Is Mortgage Payment Frequency?

Payment frequency refers to how often you make payments on your mortgage. Most lenders offer several options, including weekly, bi-weekly, semi-monthly, and monthly payments. Your payment frequency is usually set when you first arrange your mortgage, but many lenders allow you to change it later without a fee.

Why Does Payment Frequency Matter?

Choosing the right payment frequency can save you thousands of dollars in interest and help you pay off your mortgage sooner. The more often you make payments, or the more you pay per installment, the faster you reduce your mortgage balance.

Mortgage Payment Options: Weekly, Bi-Weekly, Semi-Monthly, and Monthly

Standard Payment Frequency Options Explained

1. Monthly: One payment per month, totaling 12 payments per year.
2. Semi-Monthly: Two payments per month, totaling 24 payments per year.
3. Bi-Weekly: Payments every two weeks, totaling 26 payments per year.
4. Weekly: Payments every week, totaling 52 payments per year.

Accelerated Payment Options and Their Benefits

1. Accelerated Bi-Weekly: Payments every two weeks, calculated as half of your monthly payment. This results in 26 payments per year, effectively making an extra month’s payment annually.
2. Accelerated Weekly: Payments every week, calculated as a quarter of your monthly payment. This results in 52 payments per year, also adding an extra monthly payment annually.

Accelerated options reduce your mortgage principal faster, saving you significant interest over the life of your mortgage.

Comparing Monthly Payments to Accelerated Payment Options

How Accelerated Payments Save You Money

Accelerated payments work by adding the equivalent of one extra monthly payment per year. This reduces your principal balance more quickly, meaning you pay less interest over time. For those paid bi-weekly, accelerated bi-weekly payments align with your income schedule and offer both convenience and savings.

Example: Accelerated Bi-Weekly vs Monthly Payments on a $200,000 Mortgage

Consider a $200,000 mortgage with a 25-year amortization and a 4.5% interest rate:

• Monthly Payments: $1,104, totaling $331,200 over the life of the loan.
• Accelerated Bi-Weekly Payments: $552 every two weeks, totaling $321,408 over the life of the loan.

By choosing accelerated bi-weekly payments, you could save nearly $10,000 in interest and pay off your mortgage faster.

Tips for Choosing the Right Payment Frequency

Factors to Consider When Selecting Your Payment Schedule

• Income Schedule: Align your payments with when you get paid to simplify budgeting.
• Savings Goals: Choose accelerated payments if you want to save on interest and pay off your mortgage faster.
• Flexibility Needs: Opt for standard payment options if you prioritize smaller, more manageable payments.

How to Change Your Payment Frequency Without Fees

Many lenders allow you to adjust your payment frequency without any additional costs. If your financial situation changes, reach out to your lender to explore your options.